GST Registration Threshold Limits in India

Introduction

The Goods and Services Tax (GST) regime in India mandates that businesses exceeding a certain threshold of annual turnover must register for GST. These threshold limits are crucial for determining when a business becomes liable to obtain a GSTIN (Goods and Services Tax Identification Number) and comply with the various provisions of the GST law. Understanding these limits is fundamental for businesses of all sizes to ensure they are operating legally and avoid potential penalties. This detailed article will explain the current GST registration threshold limits in India and the factors that determine when registration becomes mandatory.

Understanding Aggregate Turnover: The Basis for Threshold Limits

Before diving into the specific threshold limits, it’s essential to understand the term “Aggregate Turnover.” As defined under the GST Act, Aggregate Turnover (AATO) is the total value of all taxable supplies, exempt supplies, exports of goods or services or both, and inter-State supplies of persons having the same Permanent Account Number (PAN), computed on an all-India basis. Importantly, it excludes the value of inward supplies on which tax is payable under reverse charge and the amount of GST itself.

Current GST Registration Threshold Limits

The GST registration threshold limits in India vary based on whether the business is primarily involved in the supply of goods or services, and also depend on the state where the business is located. The states are categorized as “General Category States” and “Special Category States.”

1. For Suppliers of Goods:

General Category States: The threshold limit for GST registration for businesses primarily engaged in the supply of goods is ₹40 Lakhs. This means that if your aggregate turnover from the supply of goods in a financial year exceeds ₹40 lakhs, you are liable to register for GST.
Special Category States: For businesses primarily engaged in the supply of goods and located in the following “Special Category States,” the threshold limit is ₹20 Lakhs:

• Arunachal Pradesh
• Manipur
• Meghalaya
• Mizoram
• Nagaland
• Sikkim
• Tripura
• Uttarakhand

2. For Suppliers of Services:

General Category States: The threshold limit for GST registration for businesses primarily engaged in the supply of services is ₹20 Lakhs. If your aggregate turnover from the supply of services in a financial year exceeds this limit, you need to register for GST.
Special Category States: For businesses primarily engaged in the supply of services and located in the “Special Category States” mentioned above, the threshold limit is ₹10 Lakhs.

Important Note: If a business is involved in the supply of both goods and services, the lower threshold limit applicable to the supply of services (₹20 lakhs for general states and ₹10 lakhs for special category states) will generally apply. However, there are specific conditions and clarifications related to mixed supplies, so it’s advisable to consult the GST rules or a tax professional for precise guidance.

Special Category States for GST Threshold Purposes

The following states are currently classified as “Special Category States” for the purpose of GST registration threshold limits:

• Arunachal Pradesh
• Manipur
• Meghalaya
• Mizoram
• Nagaland
• Sikkim
• Tripura
• Uttarakhand

It’s important to note that the list of special category states can be subject to change based on notifications from the government.

When is GST Registration Mandatory (Irrespective of Threshold)?

In certain situations, GST registration is mandatory even if your aggregate turnover does not exceed the prescribed threshold limits. These include:

• Inter-State Supply of Goods: If you are making any supply of goods from one state to another, GST registration is mandatory, regardless of your turnover. However, this rule does not apply to inter-state supply of services for businesses with a turnover below the threshold.
• Casual Taxable Persons: Individuals or businesses who occasionally supply taxable goods or services in a state where they do not have a fixed place of business.
• Non-Resident Taxable Persons: Individuals or businesses from outside India making taxable supplies in India.
• Persons Liable to Pay Tax under Reverse Charge: Certain categories of recipients who are liable to pay GST instead of the supplier.
• Input Service Distributor (ISD): An office of a supplier that receives tax invoices for input services and distributes the credit to other units.
• E-commerce Operators (ECOs): Entities that own, operate, or manage digital or electronic facilities or platforms for electronic commerce.
• Suppliers Making Taxable Supply Through ECOs (under certain conditions): If an ECO is required to collect tax at source (TCS) under section 52, then every person supplying goods or services through such ECO must obtain GST registration, irrespective of their turnover.
• Online Information and Database Access or Retrieval (OIDAR) Services: Suppliers of online information and database access or retrieval services from outside India to unregistered persons in India.

How to Determine if Your Turnover Exceeds the Threshold

To determine if you are liable for GST registration, you need to calculate your aggregate turnover for the current financial year. Here’s how:

• Calculate on an All-India Basis: Consider the turnover of all your business locations across India under the same PAN.
• Include All Business Verticals: If you have multiple business verticals (different lines of business), the turnover of all of them should be included.
• Consider Turnover from the Beginning of the Financial Year: Track your turnover from April 1st of the current financial year. Once your aggregate turnover exceeds the applicable threshold, you become liable for registration within 30 days from that date.

Consequences of Not Registering When Liable

Failure to obtain GST registration when your aggregate turnover exceeds the threshold or when it’s otherwise mandatory can lead to various penalties and legal consequences, including:

• Levy of Penalties: Tax authorities can impose penalties for non-registration.
• Inability to Claim Input Tax Credit: You cannot claim input tax credit on your purchases if you are not registered under GST.
• Difficulty in Conducting Business: Many businesses prefer to deal with GST-registered suppliers and customers, which can limit your business opportunities.
• Legal Action: Continued operation without registration when liable can lead to legal action by the tax authorities.

Voluntary GST Registration

Even if your aggregate turnover is below the threshold limits, you can still opt for voluntary GST registration. This can be beneficial for businesses that want to:

• Claim Input Tax Credit: Voluntary registration allows you to claim ITC on your purchases.
• Facilitate Inter-State Business: Having GST registration can make it easier to conduct business with parties in other states.
• Enhance Business Credibility: GST registration can add to the credibility and professionalism of your business.

Calculating Turnover for Threshold Limit

Remember that for the purpose of determining the threshold limit, you need to consider your aggregate turnover, which includes the value of all taxable, exempt, export, and inter-state supplies, excluding inward supplies under reverse charge and the GST amount itself.

Conclusion

Understanding the GST registration threshold limits is crucial for every business in India. By knowing the applicable limits based on your nature of business and location, you can determine when you become liable for GST registration. Additionally, being aware of the situations where registration is mandatory regardless of turnover is equally important. Regularly monitoring your aggregate turnover and staying informed about any changes in the regulations will ensure that your business operates within the legal framework of the GST regime. If you are unsure about your registration obligations, it is always advisable to consult with a tax professional.